January 2013

Regulatory Landscape

Now that the 2012 U.S. Presidential election is over and we steam ahead into 2013, many questions arise as to what the regulatory landscape will look like. In an effort to bring readers a variety of perspectives, Spray surveyed regulatory experts and researched various sources to bring together a comprehensive look at what lies ahead in the aerosol and other industries.

Laurie Nelson, Randlett/Nelson/Madden, consultant to the National Aerosol Association (NAA)

California 2013

As we go to press, there is still a lot of moving parts in California in both the legislative and regulatory arena that make it challenging to predict the future with any certainty. Several elections have yet to be decided, but it appears as though the Democrats will have a 2/3rds super-majority in both houses, as well as controlling all the state-wide offices. This will allow them the option of passing new taxes, urgency measures (which would take effect upon Governor’s signature), and moving measures to the ballot—all without any participation from the Republican Party.

Nelson

There are a large number of new members (due to term limits in California) and until the first votes are taken, it is challenging to predict how liberal the state will go or if the moderate Democrats will use their numbers to temper some of the less reasonable measures. Also, as some in California are called to serve in the Presidential Administration, it will set off a domino effect of folks scrambling to fill those offices.

We will have new Chairs of both Environmental Committees in the Legislature but whether that leads to more robust discussions will depend in part on the rest of the committee membership. Surveying the regulatory landscape… Following the 2012 presidential elections, the experts weigh in. The top three regulatory issues are projected to be:

• Green Chemistry regulations are in the process of being finalized. Some time in 2013, California’s 70+ pages of new regulatory requirements implementing this program should be complete. Although the Dept. of Toxic Substances Control (DTSC) is indicating they will begin “small” with 4-5 product/chemical combinations, this is a program that does offer DTSC enormous
authority over almost every product sold into California.

• California also has a new 75% recycling goal they are pushing to meet which will require your attention. The current thinking is “extended producer responsibility” which translates into either an industry-run take back program or a fee from industry to support a state-run take back program. This could easily be applied to aerosol containers.

• As most of you are aware, the California Air Resources Board (CARB) will be exploring the low-vapor pressure exemption which is of critical importance to this industry. This is an issue that will require everyone’s involvement to resolve. (Editor’s note: see Regulatory Issues, p. 8, for more information.)

The Golden State remains a place deserving of our attention and participation.

Doug Raymond, Raymond Regulatory Resources (3R), LLC

Given the results of the 2012 elections, the regulatory arena will continue to get tougher. Regulators will continue to push for new regulations and worse, we will likely start to see fees/taxes accompany the regulation or follow close behind. In California, we saw new taxes being voted in. This will reinforce the government and the regulators in particular, to continue on their “mission.” In 2013, look or more regulations to surface on Green Chemistry, Recycling Requirements and, of course, volatile organic compound (VOC) issues. In

Raymond

California, we will likely see a new emergence of enforcement actions on consumer products. CARB enforcement is finding new and innovative ways to track product into the state.

Finally, the election results will not help in our efforts in the South Coast Air Quality Management District (SCAQMD). We will find that dealing with the SCAQMD will likely become increasingly more difficult and “friends” in the legislature are on the decline.

2013 and beyond will bring significant challenges to manufacturers of aerosol coatings and aerosol adhesives. In California, aerosol coatings will face stricter standards, a revised Table of MIR Values and more active enforcement from CARB, which is currently in the midst of a landmark rulemaking for aerosol coatings. You will recall that the aerosol coatings reactivity regulation, the first of its kind, was adopted in the late 1990s and this will be the first significant change to it. The changes that are currently being discussed include very aggressive reductions in the largest categories of aerosol coatings along with a few smaller categories. In addition, CARB intends to make the recently adopted revised Table of MIR Values effective for use for the aerosol coating regulation in this rulemaking. The combination of very aggressive, revised standards along with a revised Table of MIR Values (the base numbers used to calculate compliance with the reactivity standards), will be a difficult compliance exercise for the industry, given the large number of products that will require reformulation and the high volume of some of these products.

McAuliffe

Along with these amendments, the aerosol coatings industry will certainly face diligent enforcement efforts from the CARB since the issue with regard to identification of volatile compounds in a formula appears to be resolved.

Compliance with the U.S. EPA national rule for aerosol coatings will also become more difficult—or at least difficult to monitor efficiently because, once the California amendments are adopted, manufacturers and formulators will be required to use two different reactivity values for reactive compounds: the revised Table of MIR Values in California and the Table of Reactivity Factors for compliance with the national rule. At the moment, there is no indication that the EPA is considering any amendments to the aerosol coatings national rule although ACA is considering/preparing a petition for rulemaking requesting that EPA harmonize at least the Table of Reactivity Factors with the revised Table of MIR Values in California.

As if these changes weren’t enough, there may still be some regulatory activity in Canada for aerosol coatings. We will need to stay tuned to our neighbors in the North until this issue is clearly resolved.

Aerosol adhesives will also face very difficult regulatory changes in 2013 as well. The California Air Resources Board has proposed very aggressive mass-based VOC standards for the two general categories of aerosol adhesives: Mist Sprays and Web Sprays. Currently, the standard is 65% volume by weight and 55% volume by weight respectively; but CARB has proposed that these standards be reduced to 30%. Should this proposed standard be adopted, it seems clear that almost all products on the market will have to be reformulated as CARB’s survey data indicates that there are only 13 products that currently comply.

If CARB’s proposed standard for aerosol adhesives becomes the regulatory limit in California, manufacturers will face a retail landscape that is governed by inconsistent standards. This will certainly present a supply chain management issue. And there will no doubt be some effort by the Ozone Transport Commission (OTC) states along with the Lake Michigain Air Directors Coalition (LADCO) states to consider adoption of this standard as well.

Mike Moffatt, Ph.D., Nexreg Compliance, Inc., London, ON, Canada

Perhaps the biggest change will occur north of the border, when Canada enacts their version of the Globally Harmonized System (GHS). Rules for material safety data sheets (MSDSs) and workplace labels will be altered drastically, likely at the end of 2013. We are

Moffat

expecting a two-year phase-in period. Unfortunately, the Canadian GHS-based rules are likely to have significant differences from those of Europe and the U.S., making true harmonization a pipe dream. In the U.S., we expect further guidance from the Occupational Safety & Health Administration (OSHA) on their GHS rules. In particular, expect to see the issue of “hazards not otherwise classified” (HNOCs) clarified. There is a

great deal of uncertainty among aerosol companies on what hazards they should be looking out for and how to test for them. Given the large potential civil liabilities for failing to properly disclose HNOCs on MSDSs, additional guidance from OSHA would go a long way in quelling the fears of regulatory personnel.

Hunt

Steve Hunt, President, ShipMate, Inc.

Now that the election is over and the President has won a second term, many believe that he will be more emboldened in terms of environmental and energy regulation now that he doesn’t need to worry about re-election. I believe that there will be a very proactive regulatory environment during the second term, as well as a substantial increase in enforcement activities.

During President Obama’s first term, The U.S. Dept. of Transportation (DOT) published a significant rulemaking that eliminates the ORM-D classification for all modes by Jan. 1, 2014, which will have a substantial impact on consumer products’ manufacturers and distributors. U.S. OSHA also published one of the most significant rulemakings in its history. By adopting the GHS standards, every industry segment will be affected by the new hazard communication and safety data sheet standards. With implementation dates of Dec. 1, 2013 (Hazard Communication Training) and July 1, 2015 (Labeling, Safety Data
Sheets), during the last 18 months of the President’s second term, you can certainly count on an increase in the number of inspections and civil penalty cases.

ACI anticipates that at the federal and state levels, the regulatory climate will remain fully active in 2013.

At EPA, draft rules regarding how the Agency seeks information on chemical identity in light of confidential business information remain of great interest, to both chemical manufacturers and the consumer product makers who innovate with those chemicals.

ACI continues to seek modernization of the Toxic Substances Control Act (TSCA). It will be important to have EPA at the table in 2013 and beyond to engage on aspects of updating the nation’s premier chemical management law.

Troutman

A key ACI goal in TSCA modernization is to ensure our members’ ability to innovate and formulate. ACI is committed to efforts that focus priorities and are practical, timely, transparent and responsive to the needs of consumers and other stakeholders, while managing a risk-based approach. The resulting program should encourage innovation, be credible, and acknowledge the benefits our products provide to enhance health and the quality of life.

It should be noted that EPA continues to explore its TSCA rulemaking authority in light of the current state of legislative activities. In addition to the above item on chemical identity rulemaking activities, EPA has issued Significant New Use Rules (SNURs) and, using prioritization factors and data sources that it announced last year, EPA has issued a list of 83 chemicals that it will conduct risk assessments on over the next five years.

Several states, especially California, Washington and Oregon, are considering chemical regulations that could have a great impact on the cleaning product supply chain.

Consumer Specialty Products Association (CSPA)
As part of its post-election coverage, Bloomberg BNA Daily Environment Report interviewed a number of trade groups representing the chemical and consumer products industries regarding what is anticipated with the return of the current administration. The Consumer Specialty Products Association (CSPA) was asked for its thoughts on the top issues where they may see immediate traction.

“The CSPA expects the EPA in the near future to spell out requirements for what are known as ‘minimum risk’ pesticide products,” the CSPA noted in response on ww.cspa.org. “EPA submitted a draft proposed rule to clarify the exemption requirements for minimum risk pesticides to the departments of Agriculture and Health & Human Services in December 2011 for interagency review. According to CSPA, the rule is expected to require testing to ensure such minimal risk products are effective, as well as certain product chemistry and stability testing for the products, which are exempted from more significant regulation under Section 25(b) of the Federal Insecticide, Fungicide, and Rodenticide Act.”

More on the EPA

Inside Counsel indicated that the EPA is on the verge of issuing or proposing a long list of new regulations. Some of the most important regulations expected are:

Air PollutionGHG emissions from new electric generating plants: On March 27, the EPA announced proposed new regulations setting GHG standards for new electric generating plants. The standards could be met by modern natural gas-fired plants but not by coal-fired power plants using current technology. EPA plans to issue the final rule by April 2013.

GHG emissions from existing electric generating plants: The EPA has the authority to regulate GHGs from existing plants but has not announced what these standards will look like or when they will be announced. A proposal is likely in the coming year.

Boiler and Utility MACTs: The EPA issues standards for the Maximum Achievable Control Technology (MACT) for various sources of hazardous air pollutants. EPA will shortly issue new MACT standards for mercury and other emissions from industrial boilers and incinerators, and separate standards for new electric generating units.

NAAQS: The EPA is preparing to issue or propose new, tighter National Ambient Air Quality Standards (NAAQS) for ground-level ozone and for fine particulate matter (PM 2.5).

Tier 3 Vehicle and Sulfur Rules: The EPA is considering a set of rules, called the Tier 3 rules, that would reduce the permissible content of sulfur and certain other pollutants in gasoline, and regulate emissions of these pollutants from new motor vehicles and engines.

Cross-State Air Pollution Rule: This was a major rule issued in August 2011 regarding sulfur dioxide and nitrogen oxides pollution from stationary sources in the eastern and Midwestern states. The D.C. Circuit invalidated the rule in August, leaving in effect the Clean Air Interstate Rule, which that court had ruled invalid (but left in place) in 2008. EPA is seeking en banc review of the new decision; if EPA does not prevail here, it will need to go back to the drawing board with these rules.

New Source Performance Standards: The EPA is developing or revising NSPSs for several industrial sectors.

Water Hydraulic fracturing: The EPA is conducting a major study of the practice of hydraulic fracturing, in view of the concerns that have been expressed over its impacts on water pollution, air pollution, and other areas. A draft report is expected in 2013; if the report finds that hydraulic fracturing leads to significant methane emissions, the EPA restrictions on those emissions could follow. During the campaign President Obama repeatedly expressed his support for this practice, but the EPA is preparing rules that will regulate it.Cooling Water Intake Structures: The EPA will take final action on this proposed rule under Section 316(b) of the Clean Water Act by July 2013.Concentrated Animal Feeding Operations (CAFOs): The EPA is revising its rules to expand the universe of regulated CAFOs and to provide more stringent permitting requirements for applications of waste and produced water. The revision is expected in May 2013.

Wetlands: Recent Supreme Court decisions have led to great confusion about the extent of federal authority over isolated waters, intermittent streams and certain other areas. The EPA and the Corps of Engineers have been working on guidance to clarify what lands are and are not federally regulated.

Hazardous & Solid WasteCoal ash: Coal-fired power plants generate large quantities of coal ash. For many years there has been ambiguity about the status of this ash under the Resource Conservation & Recovery Act (RCRA). In June 2010, the EPA proposed several possible approaches; under one of them, coal ash would become a “special waste” under RCRA, which would subject it to extremely expensive handling requirements. This became quite controversial. The EPA sent the new coal ash standard to the Office of Management and Budget for regulatory review in March. In October the EPA announced that due to new data and the subsequent need to complete revisions of toxicity characteristics and toxicity characteristic leaching procedure regulations, October 2013 is the earliest the standards will be ready. SPRAY